USD, bond yields drop after GDP miss
The USD’s recent winning streak reversed overnight after a weaker-than-expected GDP print, while in-line inflation also weighed on the greenback.
Annualised March‑quarter GDP printed at 1.6% versus forecasts of 2.0%. Core PCE inflation was in line with forecasts at 3.8%.
Meanwhile, reports that the US and Iran agreed to extend their ceasefire helped lift risk sentiment. US equities hit new record highs, while US bond yields drifted lower.
The USD index reversed after earlier reaching its highest level since 7 April.
AUD/USD rose 0.3%. The kiwi continued to outperform following this week’s RBNZ meeting, with NZD/USD up 0.6%.
In Europe, EUR/USD gained 0.2%, while GBP/USD rose 0.1%. USD/JPY fell 0.2%.
Fed stands firm, remaining data-dependent
Earlier, the USD had traded mostly stronger following more hawkish commentary from the Federal Reserve.
Fed Vice Chair Philip Jefferson stated that the central bank is well positioned to respond to incoming data. He emphasised that inflation risks remain tilted to the upside, even if tariff and energy pressures ease later this year.
Meanwhile, Fed Governor Lisa Cook said she is prepared to raise interest rates if inflation does not decline in a timely manner.
Reinforcing this firm stance, Minneapolis Fed President Neel Kashkari stated that he would prioritise bringing down inflation over supporting the labour market, noting that consumer price pressures remain too high.
Markets are currently pricing around a 50% probability of a rate hike at the October meeting.
With markets aggressively pricing a “higher-for-longer” stance, the USD continues to benefit from a structural yield advantage, offsetting improving global risk sentiment.
USD/SGD, USD/CNH track greenback lower
In Asian FX, USD/SGD moved lower and now sits just 1.7% above its 12-year low at 1.2586.
We see the 21-day EMA at 1.2768 and the 50-day EMA at 1.2764 as the next resistance levels.
Meanwhile, USD/CNH is trading just 0.2% above its 27 May low of 6.7758. For the pair to build upward momentum, it needs to break above the 21-day EMA at 6.8029 before testing the 50-day EMA at 6.8308.
A stronger Chinese yuan pushed both EUR/CNH and SGD/CNH to 12-month lows.
Crude oil down nearly 10% over last week on peace hopes
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 25 – 29 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
